Question

The following information is for DE Ltd. for the last financial year Current Ratio:        5...

The following information is for DE Ltd. for the last financial year

Current Ratio:        5

Quick Ratio:                      1.8

Inventory Turnover: 7

Total Current Assets: $340,000

Cash:                 $43,000

COGS = 80% of Sales

Required:

  1. What were the total sales for the year?
  2. How many day’s sales were outstanding in Accounts Receivable?
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Answer #1

Current ratio = 5

Current assets / Current liabilities = 5

$340,000 / Current liabilities = 5

Current liabilities = $68,000

Quick ratio = 1.8

(Current assets - Inventory) / Current liabilities = 1.8

($340,000 - Inventory) / $68,000 = 1.8

$340,000 - Inventory = $112,400

Inventory = $217,600

Inventory turnover = COGS / Inventory

7 = COGS / $217,600

COGS = $1,523,200

COGS = Sales * 80%

Sales = $1,523,200 / 80%

= $1,904,000

Days sales outstanding = 365 / Inventory turnover

= 365 / 7

= 52 days

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